Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/66018
Authors: 
Strulik, Holger
Trimborn, Timo
Year of Publication: 
2010
Series/Report no.: 
Discussion Paper, Wirtschaftswissenschaftliche Fakultät, Leibniz Universität Hannover 454
Abstract: 
We set up a neoclassical growth model extended by a corporate sector, an investment and finance decision of firms, and a set of taxes on capital income. We provide analytical dynamic scoring of taxes on corporate income, dividends, capital gains, other private capital income, and depreciation allowances and identify the intricate ways through which capital taxation affects tax revenue in general equilibrium. We then calibrate the model for the US and explore quantitatively the revenue effects from capital taxation. We take adjustment dynamics after a tax change explicitly into account and compare with steady-state effects. We find, among other results, a self-financing degree of corporate tax cuts of about 70-90 percent and a very flat Laffer curve for all capital taxes as well as for tax depreciation allowances. Results are strongest for the tax on capital gains. The model predicts for the US that total tax revenue increases by about 0.3 to 1.2 percent after abolishment of the tax.
Subjects: 
Corporate taxation
capital gains
tax allowances
revenue estimation
Laffer curve
dynamic scoring
JEL: 
E60
H20
O40
Document Type: 
Working Paper

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